To provide for a study of the asset-backed securitization process and for residential mortgage underwriting standards.

SA 3955. Mr. CORKER (for himself, Mr. Gregg, Mr. LeMieux, Mr. Coburn,
and Mr. Brown of Massachusetts) submitted an amendment intended to be
proposed to amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for
himself and Mrs. Lincoln)) to the bill S. 3217, to promote the
financial stability of the United States by improving accountability
and transparency in the financial system, to end ``too big to fail'',
to protect the American taxpayer by ending bailouts, to protect
consumers from abusive financial services practices, and for other
purposes; as follows:

On page 1045, strike line 12 and all that follows through
``SEC. 942.'' on page 1052, line 3, and insert the following:
(b) Study on Risk Retention.--
(1) Study.--
(A) In general.--The Board of Governors, in coordination
and consultation with the Comptroller of the Currency, the
Corporation, the Federal Housing Finance Agency, and the
Commission, shall conduct a study of the asset-backed
securitization process.
(B) Issues to be studied.--In conducting the study under
subparagraph (A), the Board of Governors shall evaluate--
(i) the separate and combined impact of--

(I) requiring loan originators or securitizers to retain an
economic interest in a portion of the credit risk for any
asset that the securitizer, through the issuance of an asset-
backed security, transfers, sells, or conveys to a third
party; including--

(aa) whether existing risk retention requirements such as
contractual representations and warranties, and statutory and
regulatory underwriting and consumer protection requirements
are sufficient to ensure the long-term accountability of
originators for loans they originate; and
(bb) methodologies for establishing additional statutory
credit risk retention requirements;

(II) the Financial Accounting Statements 166 and 167 issued
by the Financial Accounting Standards Board, as well as any
other statements issued before or after the date of enactment
of this section the Federal banking agencies determine to be
relevant;

(ii) the impact of the factors described under subsection
(i) of this section on--

(I) different classes of assets, such as residential
mortgages, commercial mortgages, commercial loans, auto
loans, and other classes of assets;
(II) loan originators;
(III) securitizers;
(IV) access of consumers and businesses to credit on
reasonable terms.

(2) Report.--Not later than 18 months after the date of
enactment of this section, the Board of Governors shall
submit to Congress a report on the study conducted under
paragraph (1). Such report shall include statutory and
regulatory recommendations for eliminating any negative
impacts on the continued viability of the asset-backed
securitization markets and on the availability of credit for
new lending identified by the study conducted under paragraph
(1).

SEC. 942. RESIDENTIAL MORTGAGE UNDERWRITING STANDARDS.

(a) Standards Established.--Notwithstanding any other
provision of this Act or any other provision of Federal,
State, or local law, the Federal banking agencies, in
consultation with the Federal Housing Finance Agency and the
Department of Housing and Urban Development, shall jointly
establish specific minimum standards for mortgage
underwriting, including--
(1) a requirement that the mortgagee verify and document
the income and assets relied upon to qualify the mortgagor on
the residential mortgage, including the previous employment
and credit history of the mortgagor;
(2) a down payment requirement that--
(A) is equal to not less than 5 percent of the purchase
price of the property securing the residential mortgage; and
(B) in the case of a first lien residential mortgage loan
with an initial loan to value ratio that is more than 80
percent and not more than 95 percent, includes a requirement
for credit enhancements, as defined by the Federal banking
agencies, until the loan to value ratio of the residential
mortgage loan amortizes to a value that is less than 80
percent of the purchase price;
(3) a method for determining the ability of the mortgagor
to repay the residential mortgage that is based on factors
including--
(A) all terms of the residential mortgage, including
principal payments that fully amortize the balance of the
residential mortgage over the term of the residential
mortgage; and
(B) the debt to income ratio of the mortgagor; and
(4) any other specific standards the Federal banking
agencies jointly determine are appropriate to ensure prudent
underwriting of residential mortgages.
(b) Updates to Standards.--The Federal banking agencies, in
consultation with the Federal Housing Finance Agency and the
Department of Housing and Urban Development--
(1) shall review the standards established under this
section not less frequently than every 5 years; and
(2) based on the review under paragraph (1), may revise the
standards established under this section, as the Federal
banking agencies, in consultation with the Federal Housing
Finance Agency and the Department of Housing and Urban
Development, determine to be necessary.
(c) Compliance.--It shall be a violation of Federal law--
(1) for any mortgage loan originator to fail to comply with
the minimum standards for mortgage underwriting established
under subsection (a) in originating a residential mortgage
loan;
(2) for any company to maintain an extension of credit on a
revolving basis to any person to fund a residential mortgage
loan, unless the company reasonably determines that the
residential mortgage loan funded by such credit was subject
to underwriting standards no less stringent than the minimum
standards for mortgage underwriting established under
subsection (a); or
(3) for any company to purchase, fund by assignment, or
guarantee a residential mortgage loan, unless the company
reasonably determines that the residential mortgage loan was
subject to underwriting standards no less stringent than the
minimum standards for mortgage underwriting established under
subsection (a).
(d) Implementation.--
(1) Regulations required.--The Federal banking agencies, in
consultation with the Federal Housing Finance Agency, shall
issue regulations to implement subsections (a) and (c), which
shall take effect not later than 270 days after the date of
enactment of this Act.
(2) Report required.--If the Federal banking agencies have
not issued final regulations under subsections (a) and (c)
before the date that is 270 days after the date of enactment
of this Act, the Federal banking agencies shall jointly
submit to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial Services
of the House of Representatives a report that--
(A) explains why final regulations have not been issued
under subsections (a) and (c); and

[[Page S3552]]

(B) provides a timeline for the issuance of final
regulations under subsections (a) and (c).
(e) Enforcement.--Compliance with the rules issued under
this section shall be enforced by--
(1) the primary financial regulatory agency of an entity,
with respect to an entity subject to the jurisdiction of a
primary financial regulatory agency, in accordance with the
statutes governing the jurisdiction of the primary financial
regulatory agency over the entity and as if the action of the
primary financial regulatory agency were taken under such
statutes; and
(2) the Bureau, with respect to a company that is not
subject to the jurisdiction of a primary financial regulatory
agency.
(f) Exemptions for Certain Nonprofit Mortgage Loan
Originators.--
(1) In general.--Not later than 180 days after the date of
enactment of this Act, the Federal banking agencies, in
consultation with the Secretary of Housing and Urban
Development and the Secretary of the Treasury, may jointly
issue rules to exempt from the requirements under subsection
(a)(2), mortgage loan originators that are exempt from
taxation under section 501(c)(3) of the Internal Revenue Code
of 1986.
(2) Determining factors.--The Federal banking agencies
shall ensure that--
(A) the lending activities of a mortgage loan originator
that receives an exemption under this subsection do not
threaten the safety and soundness of the banking system of
the United States; and
(B) a mortgage loan originator that receives an exemption
under this subsection--
(i) is not compensated based on the number or value of
residential mortgage loan applications accepted, offered, or
negotiated by the mortgage loan originator;
(ii) does not offer residential mortgage loans that have an
interest rate greater than zero percent;
(iii) does not gain a monetary profit from any residential
mortgage product or service provided;
(iv) has the primary purpose of serving low income housing
needs;
(v) has not been specifically prohibited, by statute, from
receiving Federal funding; and
(vi) meets any other requirements that the Federal banking
agencies jointly determine are appropriate for ensuring that
a mortgage loan originator that receives an exemption under
this subsection does not threaten the safety and soundness of
the banking system of the United States.
(3) Reports required.--Before the issuance of final rules
under subsection (a), and annually thereafter, the Federal
banking agencies shall jointly submit to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of
Representatives a report that--
(A) identifies the mortgage loan originators that receive
an exemption under this subsection; and
(B) for each mortgage loan originator identified under
subparagraph (A), the rationale for providing an exemption.
(4) Updates to exemptions.--The Federal banking agencies,
in consultation with the Secretary of Housing and Urban
Development and the Secretary of the Treasury--
(A) shall review the exemptions established under this
subsection not less frequently than every 2 years; and
(B) based on the review under subparagraph (A), may revise
the standards established under this subsection, as the
Federal banking agencies, in consultation with the Secretary
of Housing and Urban Development and the Secretary of the
Treasury, determine to be necessary.
(g) Rules of Construction.--Nothing in this section may be
construed to permit--
(1) the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation to make or guarantee a
residential mortgage loan that does not meet the minimum
underwriting standards established under this section; or
(2) the Federal banking agencies to issue an exemption
under subsection (f) that is not on a case-by-case basis.
(h) Definitions.--In this section, the following
definitions shall apply:
(1) Company.--The term ``company''--
(A) has the same meaning as in section 2(b) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841(b)); and
(B) includes a sole proprietorship.
(2) Mortgage loan originator.--The term ``mortgage loan
originator'' means any company that takes residential
mortgage loan applications and offers or negotiates terms of
residential mortgage loans.
(3) Residential mortgage loan.--The term ``residential
mortgage loan''--
(A) means any extension of credit primarily for personal,
family, or household use that is secured by a mortgage, deed
of trust, or other equivalent security interest in a dwelling
or residential real estate upon which is constructed or
intended to be constructed a dwelling; and
(B) does not include a mortgage loan for which mortgage
insurance is provided by the Department of Veterans Affairs,
or the Rural Housing Administration.
(4) Extension of credit; dwelling.--The terms ``extension
of credit'' and ``dwelling'' shall have the same meaning as
in section 103 of the Truth in Lending Act (15 U.S.C. 1602).

SEC. 943. STUDY ON FEDERAL HOUSING ADMINISTRATION
UNDERWRITING STANDARDS.

(a) Study.--
(1) In general.--The Comptroller General of the United
States shall conduct a study evaluating whether the
underwriting criteria used by the Federal Housing
Administration are sufficient to ensure the solvency of the
Mutual Mortgage Insurance Fund of the Federal Housing
Administration and the safety and soundness of the banking
system of the United States.
(2) Issues to be studied.--In conducting the study under
paragraph (1), the Comptroller General shall evaluate--
(A) down payment requirements for Federal Housing
Administration borrowers;
(B) default rates of mortgages insured by the Federal
Housing Administration;
(C) characteristics of Federal Housing Administration
borrowers who are most likely to default;
(D) taxpayer exposure to losses incurred by the Federal
Housing Administration;
(E) the impact of the market share of the Federal Housing
Administration on efforts to sustain a viable private
mortgage market; and
(F) any other factors that Comptroller General determines
are appropriate.
(b) Report.--Not later than 6 months after the date of
enactment of this Act, the Comptroller General shall submit
to Congress a report on the study conducted under subsection
(a) that includes recommendations for statutory improvements
to be made to the underwriting criteria used by the Federal
Housing Administration, to ensure the solvency of the Mutual
Mortgage Insurance Fund of the Federal Housing Administration
and the safety and soundness of the banking system of the
United States.

SEC. 944.

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